January March 2010 Conference Call Georg Denoke Member of the Executive Board & CFO 4 May 2010
Disclaimer This presentation contains forward-looking statements about Linde AG ( Linde ) and their respective subsidiaries and businesses. These include, without limitation, those concerning the strategy of an integrated group, future growth potential of markets and products, profitability in specific areas, synergies resulting from a merger between Linde and The BOC Group plc ( BOC ), post-merger integration, the future product portfolio, anti-trust risks, development of and competition in economies and markets of the combined group. These forward looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside of Linde s control, are difficult to predict and may cause actual results to differ significantly from any future results expressed or implied in the forward-looking statements in this presentation. While Linde believes that the assumptions made and the expectations reflected in this presentation are reasonable, no assurance can be given that such assumptions or expectations will prove to have been correct and no guarantee of whatsoever nature is assumed in this respect. The uncertainties include, inter alia, the risk that the business of BOC will not be integrated timely and successfully, synergies will not materialize or of a change in general economic conditions and government and regulatory actions. These known, unknown and uncertain factors are not exhaustive, and other factors, whether known, unknown or unpredictable, could cause the combined group s actual results or ratings to differ materially from those assumed hereinafter. Linde undertakes no obligation to update or revise the forward-looking statements in this presentation whether as a result of new information, future events or otherwise. 2
Highlights Back to growth in 2010 Group sales increase of 7.4% to 2.894 bn Group operating profit rises 19.1% to 641 m Reported EPS of 1.17 (+72.1%), adjusted EPS of 1.41 (+42.4%) Operating Cash Flow of 397 m (Q1 09: 412 m) Economic recovery and HPO savings drive earnings growth Further market recovery in mature markets Emerging markets keep their good growth momentum, led by Asia HPO savings drive further margin improvement of 210 bp to 22.1% (Q1 09: 20.0%) Outlook Full-year 2010 guidance confirmed: growth in group sales and operating profit 3
Group, sales by Divisions Gases recovery drives group sales up 7.4% in million, as reported Gases 2,894 2,695 +7.4% 2,157 +8.5% 2,340 Gases Division Comparable* sales increase of 3.9% Global economic recovery drives improving volumes, strongest growth in tonnage and bulk product areas Positive currency impacts from ZAR and AUD more than compensate minor negative effects on USD Engineering Division Engineering Other/Cons. 549-11 -5.8% 517 37 Sales slightly below last year s Q1 level Order intake of 502 m *excluding currency, natural gas price and consolidation effect 4
Group, operating profit by Divisions 210 bp group margin improvement supported by HPO savings in million, as reported Gases Engineering Other/Cons. 641 538 +19.1% 546 +14.5% 625 45 +13.3% 51 62-53 -35 Gases Division Double-digit operating profit growth Overproportionate growth compared to sales: operating margin increase of 140 bp to 26.7% (Q1 09: 25.3%) HPO savings continue to come through in all regions, we are maintaining our full commitment Engineering Division Execution of order backlog on plan Margin of 9.9%, ahead of our 8% target Op. margin 20.0% 22.1% +210 bp on reported basis +140 bp, adjusted for 20 m restructuring charges in Q1 2009 *EBITDA before non-recurring items and incl. share of net income from associates and joint ventures 5
Gases Division, sales bridge Sales increase of 3.9% on comparable basis in million +3.9% 2,340 +4.3% +0.9% 2,157-0.6% Q1 2009 Consolidation Currency Natural Gas Price/Volume Q1 2010 6
Gases Division, sales by operating segment Emerging markets still show the strongest momentum in million Western Europe 935 Americas +3.7% +2.6%* 970 501 +2.6% 514 +5.9%* Asia & Eastern Europe 17.3% 502 428 +12.3%* South Pacific & Africa +21.4% 375 309-3.9%* Volume recovery visible in our industrial end markets Strongest momentum in Emerging Markets, with double-digit growth in Greater China as well as South- and East-Asia Europe showing slower recovery in Q1, impacted by a lower contractual pass-thru US demand improving in metals, chemicals and manufacturing sectors Major currency benefits in South Pacific and Africa *excluding currency, natural gas price and consolidation effect 7
Gases Division, operating profit by operating segment HPO continues to drive margin improvements in million Western Europe 247 26.4% Americas 104 20.8% +11.3% +200 bp 275 28.4% +7.7% 112 +25.8% 66 +100 bp +70 bp 21.8% 21.4% Asia & Eastern Europe YoY margin increase in the Gases Division 20.2% 155 supported by efficiency 129 improvements in all +80 bp operating segments 30.1% South Pacific & Africa 30.9% 83 22.1% Western Europe and Asia & Eastern Europe further expand margins Americas margin continues to benefit from our improved structural set-up 8
Gases Division, sales by product areas (consolidated) Business environment improving in all product areas in million, comparable*, consolidated Healthcare 2,252* 258 +3.9% +2.7% 2,340 265 Tonnage 516 +10.3% 569 Bulk 541 +5.2% 569 Cylinder 937-937 *excluding currency, natural gas price and consolidation effect 9
Gases Division, project pipeline 2.85 bn of investment, majority in emerging markets 2012 pipeline of 10 projects with a combined project amount of ~ 400 m, several new signings in the first quarter 2.85 bn investments between 2008-2012 (thereof 0.5 bn in JVs @ share) Most significant sales recognition in 2010; sales contribution in 2011 close to 2010 given ramp-up of projects Project amount by on-stream date (incl. JVs) ~ 800 m ~ 750 m ~ 500 m ~ 400 m ~ 400 m Others 36% 64% Emerging markets 2008 2009 2010 2011 2012 # of projects (total: 82) 17 16 24 15 10 10
Engineering Division, key figures Strong order backlog supported by a recovery in new orders Sales recognition in line with planned order execution Order intake of 502 m up 76% from last year s low level Order backlog up to 4.281 bn (year-end 2009: 4.215 bn) Unchanged margin target of 8%, Q1 2010 well ahead in million Q1 09 Q1 10 yoy Order intake 285 502 +76.1% Sales 549 517-5.8% Operating profit* Margin 45 8.2% 51 9.9% +13.3% +170 bp *EBITDA before non-recurring items and incl. share of net income from associates and joint ventures 11
Group, cash flow statement Free cash flow up in million Operating Profit Change in Working Capital Other changes Operating Cash Flow Q1 09 Q1 10 538 641-98 -146 397-223 -6 38 Investment Cash Flow -282-191 Free Cash Flow before Financing 130 206-37 -89 412 Investments in tangibles / intangibles -267 Acquisitions / Financial investments -60 Other 45 12
Group, solid financial position Successful deleveraging rewarded with rating upgrade 2009 Net debt/ebitda ratio of 2.6x, well within our target range of 2-3x Net debt in bn Net debt/ebitda 12.815 3,5 4.8 9.933 6.427 6.423 6.119 6.054 3.03 2.5 2,5 2.7 2.5 2.6 Target range: 2.0 3.0x 30/9/06 2006 2007 2008 2009 30/3/10 2.02 2006 2007 2008 2009 Rating upgrade by S&P and Moody s towards A- and A3 respectively, both with stable outlook 13
2010 outlook Based on current consensus expectations for a moderate economic recovery Group: Growth in sales and operating profit vs 2009 Capital expenditure above 2009 level Confirmation of HPO programme: 650-800 m of gross cost savings in 2009-2012 Gases: Increase in sales and operating profit vs 2009, operating profit above record level of 2008 Strong project pipeline in the tonnage product area Gradual demand improvement in the bulk & cylinder product areas Ongoing structural growth in healthcare Engineering: Sales at least on 2009 level Order backlog provides visibility for up to two years First indications of improving investment climate for our key plant types Operating margin target unchanged at 8% 14
Appendix
Group Financial Highlights in million Q1 09 Q1 10 in % Sales 2,695 2,894 +7.4 Operating profit 538 641 +19.1 Margin 20.0 22.1 +210 bp EBIT before special items and PPA depreciation 323 410 +26.9 PPA depreciation 74 59 - EBIT 249 351 +41.0 Financial Result -79-68 - Taxes 42 70 - Net income 128 213 +66.4 Net income Part of shareholders Linde AG 115 198 +72.2 EPS in 0.68 1.17 +72.1 Adjusted EPS in 0.99 1.41 +42.4 16
Gases Division, Joint Ventures Asian projects drive growth of our JV sales in million Proportionate Sales (not incl. in the Group top-line) Share of Net Income (contribution to operating profit) 10 73 +12.3% -11.1% 82 18 16 Q1 2009 Q1 2010 17
Group, Accounting considerations Impact of PPA and EFL Purchase Price Allocation (PPA) Impact in Q1 2010: 59 m (Q1 2009: 74 m) Expected impact FY 2010: 200-250 m IFRIC 4: Embedded Finance Lease (EFL) Impact* in Q1 2010 : -28 m (Q1 2009 : -32 m) Expected impact* FY 2010: -112 m *(on Sales and EBITDA) Background: The difference between the purchase cost of BOC and related acquisitions in Asia and their net asset value has been allocated to assets on the Linde balance sheet (for BOC, see Linde 2007 annual report, p. 99). The revaluation of these assets leads to additional depreciation and amortisation charges according to the useful life of the assets. Goodwill is not amortised but subject to a yearly impairment test. Depreciation & Amortisation from PPA is excluded from the calculation of Adjusted EPS. Background: Tonnage contracts dedicated to one single customer (> 95% of sales), who covers all major market risks, have to be treated under IFRS like an embedded finance lease. The related cash flow streams are therefore no more booked as sales and operating profit but recognised as amortisation of financial receivables in the balance sheet and financial income in the P&L. EBITDA multiple comparison with peers needs to be adjusted for IFRIC 4 Very minor impact on EPS, no impact on Free Cash Flow 18
Definition of financial key figures Operating Profit adjusted ROCE Return Return EBITDA (incl. IFRIC 4 adjustment) excl. finance costs for pensions excl. non-recurring items incl. share of net income from associates and joint ventures Operating profit - depreciation / amortisation excl. depreciation/amortization from purchase price allocation adjusted EPS Average Capital Employed Return equity (incl. minorities) + financial debt + liabilities from financial services + net pension obligations - cash and cash equivalents - receivables from financial services earnings after tax and minority interests + depreciation/amortization from purchase price allocation +/- non-recurring items Shares average outstanding shares 19
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